Decision Insights 2.0
Decision diseases: The 10 common ailments that
plague organizations
By Paul Rogers and Jenny Davis-Peccoud
Decision diseases: The 10 common ailments that plague organizations
Why can’t we ever make a simple decision 4. Structural sclerosis. The organization’s structure
obstructs good decision making and execution. A
without screwing it up?
At many companies, this agonized cry reverberates from
the CEO’s office to the front line. People know that too
many key decisions turn out wrong, take too long or
somehow never get translated into action. It’s one of
the most common organizational complaints we hear.
rental-car company in Europe was organized by
country. How could it ever hope to offer seamless
service to the highly profitable travelers who crossed
country borders?
5.
But decision failure is just a symptom. The best way to
address it is to diagnose the underlying condition, so
that you can take the right corrective action.
Over the years, we have seen 10 common ailments in
our work with organizations, and we have given them
quasi-medical names to help clients recognize them.
See if your company has contracted any of these debilitating decision diseases:
1.
2.
3.
Blurred vision. At some organizations, people lack
a context for making and executing key decisions.
They don’t know what hill to take, let alone how to
take it. Think of Reebok some years back. It diversified into fashion footwear and boats (not boat shoes,
boats). It was the wrong move for the company at
that time, leading to a tarnished brand and eroded
market share.
Split personality. There’s a vision, all right, but people understand it differently or else don’t buy in at
all. A UK retailer developed an ambitious storeopening plan. But the various parts of the organization—buying, store design, operations and so on—
each had a different idea on how to go about it. The
result: stalled decisions and a sluggish rollout.
Decision constipation. The organization strains,
but nothing happens. An auto company’s European
operations reached the brink of bankruptcy, and
still its cars were uncompetitive and late to market.
One reason: Global product development thought
they had the final call on new-product features. Regional marketing thought they did, causing a decision blockage.
Process paralysis. Business processes grind to a
near-halt because no one scrutinizes them with key
decisions in mind. One pharmaceutical product
team struggled to perform critical analyses on drugs
before a key stage gate. Finally—aha!—the organization realized that much of the detailed work could
be restricted to only those drugs that made it through
the stage gate.
6. Data dysfunction. The information needed for major
decisions isn’t available at the right time or in the
right format. Conversely, decision makers may be
swamped with more data than they can possibly
decipher and use. One major oil company provided senior managers with all kinds of metrics—
but no one was sure which factors actually drove
business success.
7.
Misaligned incentives. Measures and incentives
don’t reinforce good decisions. Look no farther than
the 2008 Wall Street debacle: Many traders received
outsized rewards for decisions that hurt their companies’ long-term value.
8. Talent deficiency. Positions that are central to key
decisions aren’t held by people with the necessary
experience and competencies. A struggling telecommunications company found that only 40% of
its critical positions were filled by top talent, and
only 30% of its best managers were in key jobs.
Little wonder its performance was suffering.
9. Behavior breakdown. Leaders undermine effective
decision making and execution, often unintentionally. The CEO of a large consumer-products company restructured the organization around a new
global vision and mission. But many country-based
general managers continued to operate just as they
had before, putting local interests first.
Decision diseases: The 10 common ailments that plague organizations
10. Culture collapse. The organization lacks a sense of
identity and forward movement. Decisions disappear into a dysfunctional culture. In the late 1990s,
the power technology and automation company
ABB struggled with nearly every major decision,
including bids on major jobs. ABB’s thousands of
units pursued their own priorities and jostled with
one another for advantage. Some managers had
three, four, even five bosses, and had to get approval
for major decisions from each one.
Fortunately, all of these ailments can be addressed. The
specifics naturally differ from one company to another.
But the overall prescription is usually to open up the
decision pathways, assign clear decision roles and then
create an environment that supports great decision making and execution.
Even a culture collapse, which might otherwise seem
terminal, responds to comprehensive treatment. When
Jürgen Dormann became CEO of ABB in 2002, he and
his team consolidated ABB’s units into just two divisions,
eliminated an entire management layer and centralized
profit-and-loss accountability. They built a tight, cohesive
leadership team aligned around a set of well-understood
goals, clarified roles and spelled out exactly which decisions would be made by headquarters and which by
the newly consolidated business units. By 2007, the
company was fully back on track, its share price and market value up fivefold in just five years.
For an indication of where your own company’s troubles might lie, begin by taking the diagnostic quiz at
www.decide-deliver.com. For a full workup, you may
want to make a thorough assessment of your organization’s strengths and weaknesses and then benchmark
them against Bain’s database of more than 1,000 companies. Decision ailments are too important to let fester.
Top companies maintain their decision systems at the
peak of health—and their performance reflects it.
Paul Rogers is the managing partner of Bain’s London office and leads Bain’s Global Organization practice.
Jenny Davis-Peccoud is senior director of Bain’s Global Organization practice. She is based in London.
Copyright © 2012 Bain & Company, Inc. All rights reserved.
Content: Global Editorial
Layout: Global Design
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